We often talk on our podcast about the proliferation of webinars, ebooks and squeeze pages that attempt to sell you the idea of building your get-rich-quick product.
We hammer those pitches for good reason. Because they are mostly schemes designed to find the perfect psychological price point that makes the purchase a viable impulse buy. The purveyors of these products entice and tantalize by telling you the “real” value of what they are giving you and then cutting you a deep discount. Because reasons.
If you’ve been around long enough you know that all those scams out there are variations of the same thing and mostly intended to separate you from your money quickly and at a pain point so low that you won’t mind.
What often gets lost in our discussions is that we think building products is good idea.
And that’s what I want to talk about today.
A few months ago, we discussed a program that promised to show participants how to create a product in 2 hours. A few episodes ago, we discussed another program that was designed to help you develop a product worth $197.
They have defined the perfect product. But for whom?
If you’re a cynic, you’ll probably say that the product is perfect for them. And I’d agree.
I want to take some time to walk through how we defined a product that we’re developing. I can’t get into the details of the product yet, but I can give you some insight into our strategy thus far so that you can perhaps leverage our experience into the development of your own product.
First, let’s define what a product is. In this context a product is a good that is sold on the Internet as a consumable. This takes the form of information, an ebook, a video, a subscription, etc.
Step 1 In Defining Your Perfect Product
You want to build a successful product, right? What does success mean? Building it in 2 hours or knowing you’re going to sell it for $197 before you even know what it is is just psychological gimmickry.
We have three products that we are developing right now. While each product is different, they have some commonalities. But each required us to decide what would make it successful. This helped us decide if the project was worthwhile or not.
For each we defined a target audience reach. How many customers would this product be useful for?
If we can convert 5% of that audience, what kind of revenue could we generate? What are the expenses associated with converting that 5%?
Ultimately we decided that if we could convert X number of users and generate Y dollars after expenses and taxes, then the venture would be worthwhile.
That’s success to us.
Step 2 In Defining Your Perfect Product
What type of financial model do you want for your product? Are you asking customers to pay a one time fee or will the product generate recurring revenue? Both sides have pros and cons, but the better option is usually recurring revenue because, well, it’s recurring revenue. Every product has a cost associated with gaining a lead and converting that lead. If they pay you once and move on, that’s a pretty big hit to the profitability column of your spreadsheet. But if you can convert them and make them a customer forever, then that revenue feeds the businesses’ effort to pursue more customers.
Our products are all based on a monthly subscription with some add ons for features that will have different value for different users. We’ve developed a business model to maintain and support the product while releasing new features as the product evolves.
This is where so many products fail. They develop a minimal feature set in the hope of closing sales, but then become dormant and hemorrhage users over time. This forces the developer to have to recreate a new product from scratch which is arguably harder than maintaining an existing one.
Step 3 In Defining Your Perfect Product
Have a good idea.
This is where things usually go to hell. Most ideas for products aren’t that good. And many are recycled versions of other products. And a lot of times, there is no long term vision for the product other than to make money fast. The hard truth is that those webinars and ebooks that sell the idea that a good idea and a good product can come from anyone are just flat out wrong.
Good ideas are hard to come by.
But if you are one of those people, cultivate that idea and nurture it into something awesome. There’s no product that can be successful in the long term unless it’s a good idea that adds value to your customers.
Step 4 In Defining Your Perfect Product
Find the right partners. Nope. You can’t go at it alone. At least most people can’t. The three products I am developing have about 8 shareholders across them all. Each brings a different set of talents that are crucial to the success of this effort.
Some webinars claim that as long as you know how to make a Facebook ad then you’re good to go.
But what about setting up a bank account? Or legal counsel? Or tax implications? Or technology infrastructure?
I know that some products aren’t this complex, but most products are more complex than the creator thinks. To be fair, if your intention is just to throw something up on the internet and get a bunch of suckers to give you their credit card then this article isn’t for you. But if you want to build a business that revolves around a product that you can make a livable wage off of without being someone’s minion, then you need to accept that there is inherent complexity in developing a sustainable and financially rewarding product.
If that’s you, reach out to me and I’ll be happy to share the financial spreadsheet template that my team developed to predict the financial viability of our products. You’ll need to punch in a few values, but the sheet will do the rest of the work for you.
I look forward to hearing from all of you soon to be successful entrepreneurs out there.